Semafores Blog

Planning for Crowdfunding

At Semafores we're contemplating a crowdfunding campaign to raise money to cover expenses and to generate some product awareness as we get closer to launch. We're in the early stages of planning our campaign; in fact, we haven't yet chosen a platform. We have identified two that may be a good fit for us: Appsfunder and Indiegogo.

Appsfunder

Our first candidate for a crowdfunding platform is Appsfunder, which specializes in funding mobile application development. Funding is based on milestones set by the developer—for example, releasing a beta test version, a production release, or post-release marketing. Funding goals are what is needed to reach a milestone and are paid to the developer in installments based on evidence of progress. Funding is all or nothing for each milestone and payment begins when a milestone is funded. Funders can be rewarded either with premiums, such as free downloads, extra-content, or promotional merchandise; or with a revenue share that is paid out once the application is released.

Appsfunder charges 8% on the money they collect from funders on your behalf, plus 5% of the revenue from the sale of the application for the first year. This seems like a hefty fee but Appsfunder gives you access to a community of funders outside of personal friends and contacts. They provide some marketing support for the campaign.

A glance at the past and current projects presented on Appsfunder's website reveals a variety of projects. None of the projects is very similar to our idea, which isn't a bad thing, but it does present some difficulty in determining whether our app will be able to attract funding on the site. Most projects are small, raising only a few hundred to a few thousand dollars. The larger successful projects mostly raised around $10,000. This is much less than we need to raise in total but our crowdfunding campaign isn't expected to be our only source of funds, or our largest.

Indiegogo

Our second candidate is Indiegogo, which is a general purpose crowdfunding platform. It is a rewards based platform and offers two funding models: an all-or-nothing model where the funds are collected only if the funding goal is reached or a flexible model that pays all pledged funds to the campaign owner even if the goal is not reached. Rewards we might offer in an Indiegogo campaign are the same ones we could offer for an Appsfunder campaign but we won't have the option of revenue sharing.

Indiegogo charges 4% on funds collected if the funding goal is reached. If the flexible option is used there is a fee of 9% on the funds collected if the funding goal is not reached. In addition, there are payment processing fees from credit card companies or PayPal to accept these as payment options. These run 3-5% of the funds they process. For an all-or-nothing campaign these fees are roughly similar to Appsfunder. Indiegogo offers quite a bit of advice on how to build a campaign on their website but doesn't seem to offer much access a community of funders beyond our existing contacts. Only a campaign that is already successful gets significant exposure on the Indiegogo website, though all campaigns can be browsed or searched.

A look at past and current projects on Indiegogo shows that while physical technology projects have raised large amounts of money, projects to fund development of mobile applications have generally been less successful, raising only a few thousand dollars, if anything at all.

General Considerations

Regardless of the platform we choose for our campaign, a successful crowdfunding campaign will require a significant amount of effort in execution as well as planning. There are two elements that successful campaigns have, regardless of platform. One is a good video pitch to introduce ourselves to potential funders and explain our product. While a DIY feel may work well for this video it will still be important to carefully consider what we present to the public. A low production value video may do the job for us but we may need a more professional video to reach our audience. Even if we shoot the video ourselves careful editing and some thought given to background and graphics will increase the usefulness of what we produce.

The second element common to successful campaigns is a personal touch. Though it will take time and effort from every member of the team we will need to contact everyone in our personal circles who might have an interest in our products to ask for their support, both in funding the project and in spreading the word to their own contacts.

It might be that the effort required to mount a successful crowdfunding campaign could not be justified by the amount of money that we are likely to raise. It's clear that we are unlikely to raise all of the funds that we will need to bring our products to market through a crowdfunding campaign. Perhaps the real value in crowdfunding will lie in the marketing experience we will gain which we will then be able to apply to marketing our products once development of them is complete.